Nerina Visser has selected three JSE-listed Exchange-Traded Products (ETPs) as her picks in the JSE’s online stock analysis series – Absa NewFunds GOVI ETF, Satrix Global Infrastructure ETF, and FirstRand iShares Global Clean Energy Quanto ETN.
Visser has over 20 years of experience as an ETP strategist and financial advisor.
She previously served as the president of CFA Society South Africa and is now the director and co-owner of etfSA Portfolio Management Company.
Commenting on the advantages of ETPs, Visser said that ETPs offer access to a basket of assets, including bonds and local or international equities, at a low cost and high level of convenience.
“JSE-listed ETPs offer access to several asset classes and thousands of local and international companies in 23 different developed markets with a single trade,” she said.
“With a single pick, ETPs give South Africans the investment efficiency of being invested in a broad range of companies or underlying investments.”
Visser has selected two Exchange-Traded Funds (ETF) and one Exchange-Traded Note (ETN) that will offer protection against inflation and exposure to international markets and the global renewable energy sector.
Her ETP picks, with an explanation of why she finds these bundles attractive, are listed below.
Absa NewFunds GOVI ETF
Share Code: NFGOVI
The Absa NewFunds GOVI ETF exposes investors to South African government bonds as opposed to the more well-known ETF offering of shares in several companies.
We currently find ourselves in high uncertainty surrounding economic growth, inflation, interest rates, and the performance of more traditional investments in shares.
Visser believes that the advantage of investing in the South African bond market is that the government pays very high fixed interest rates.
The average interest rate investors are getting on government bonds is around 8.5 and 9% per annum of guaranteed fixed interest – irrespective of the economy’s performance.
Visser says that the NewFunds GOVI ETF is a very attractive investment for someone looking for interest income in their investment portfolio.
Another advantage is that this bond ETF doesn’t tie you in for a fixed period before you get your money like the retail savings bonds.
This bond ETF allows investors to trade them at any time, just like any share of the JSE.
Satrix Global Infrastructure ETF
Share Code: STXIFR
While the Satrix Global Infrastructure ETF still invests in companies, it only invests in those involved in massive infrastructure development projects.
These include companies building railroads, ports, harbours, telecommunication networks and towers worldwide.
Although infrastructure developments and investments are essential in South Africa, it is a crucial theme globally.
Visser says that investing in the Global Infrastructure ETF makes investors part of this growing and very profitable sector.
This ETF gives investors excellent diversification when combined with bundles that offer shares in the more mainstream companies, such as the S&P 500.
FirstRand iShares Global Clean Energy Quanto ETN
Share Code: EGETNQ
Unlike Visser’s previous picks, the FirstRand iShares Global Clean Energy Quanto is an Exchange-Traded Note (ETN).
Visser explained that an ETN is a promise by the issuer to pay the amount reflected in the performance of the selected index.
The critical difference between an ETN and ETF is that the ETF offers shares in a fund that owns the underlying assets.
ETF investors have part ownership of those shares, whereas – in an ETN – investors don’t have that ownership.
The FirstRand iShares Global Clean Energy Quanto ETN offers investors exposure to the global clean energy sector.
This bundle invests in companies involved in the energy transition process that countries worldwide face as they move to renewable energy.
This means investors will take part in the benefits of renewable energy technologies such as solar and wind farms.
Visser noted that the derivative ‘Quanto’ means investors invest in a dollar-denominated investment.
This means The Quanto ETN investment performance will reflect in the dollar performance of the assets, combined with the rand-to-dollar exchange rate.
Visser believes the FirstRand iShares Global Clean Energy Quanto ETN offers investors a great long-term proposition to profit from the global energy transition.
*No share price graph available at time of publishing*